The B2B-cession
All media is hard
Today, I wrote about something I’ve been hearing more: B2B media isn’t as insulted in the current environment as it is typically. Plus, how generative AI search will challenge publishers without much leverage, the misaligned incentives of ad buyers and the churn spiral at The Washington Post. First up, a message from Omeda.
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The future of search hangs over publishers. The open web could very well be in terminal decline, and the changing nature of search is what might be the death blow. I joined Tk to discuss the impact of AI on search and then on publishers, and it’s hard to paint a scenario in which the adoption of generative AI in search leads to more traffic to publishers. That’s going to require reorienting many businesses. I suspect we’ll hear a lot about blocking AI crawlers in the months ahead, although as always publishers have far less leverage than they think or would like. A massive site (and LLM hunting ground) like Reddit can afford to do things the regular news publisher cannot. (Media Copilot)
Misaligned incentives are rife throughout the media ecosystem. Ad agencies are possibly the most misaligned. Clients grind them down on margin and the businesses tend to gravitate to “gray economy” areas. As Joshua Lowcock noted in his exit interview from UM Worldwide, “The conversations you have in private, we need to start having those conversations in public.” Maybe this will finally happen, since others like Arielle Garcia have added their voices to the dissatisfaction with the agency model that is “rife with competing interests and conflicted loyalties.” (Adexchanger)
Subscriptions are a forever war. There are no silver bullets in media. The Washington Post was a big beneficiary of the Trump Bump from 2016-2020, and it is now suffering the long hangover as people sensibly disengage from news. The Post now must arrest a churn spiral, as its subscriptions business has contracted 15%. This is a common issue many publishers face. In research The Rebooting just finished, 32% of publishers identified churn as the biggest challenge they face in subscriptions. (Reliable Sources)
RIP social media.”The social-media Web as we knew it, a place where we consumed the posts of our fellow-humans and posted in return, appears to be over.” What comes next? (Kyle Chayka in The New Yorker)
Deep down, even the Young Boomers know the 9-5 girl is right. Her viral TikTok on the outdated concept of the 9-5 workday checks out, even if it triggers the VCs in the arena. The best part of new generations is they question everything, and the nature of work has clearly changed from when Henry Ford instituted the 9-5 day. (Kyla Scanlon)
Understand consumption-based subscription models. Zuora has put together a series of guides to help anyone with a subscription program stay on top of the latest trend. Visit its resources page to understand everything from pricing and packaging to revenue recognition for consumption models. (Sponsored - Zuora)
The B2B-cession
B2B was always viewed as a media backwater. It never got the kind of respect within the profession that consumer media got. It was often dull and lacked the swashbuckling verve of accountability journalism at big urban newspapers or the cultural pizazz of glossies.
What B2B had was a better business model than consumer media, particularly in the digital era. B2B has always been more or less protected from the crosswinds that have regularly whipsawed consumer media. Business spending is more reliable than the boom and bust of consumers. What’s more, B2B often has solid subscriptions programs that critically are put on expense accounts, which allows you to charge more because unsurprisingly people are less price conscious when they’re spending company money.
The current weird economic situation is playing out somewhat differently. All media has had a tough year. The booming economy – the US economy expanded an incandescent 4.9% in the third quarter – does not check out for most publishers, who have seen improvements in the back half of the year but only after a fairly brutal first half. In a turnabout, many B2B publishers are in the same boat as businesses across the economy have cut operating expenses by over 5% in the drive to prioritize near-term profits over long-term growth. With a tight labor market, companies instead are scrutinizing non-labor expenditures.
The tech industry is leading the way, cutting operating expenses by 24%, according to S&P. Mark Zuckerberg declared a “year of efficiency” back in February. Meta has cut 21,000 people in a little over a year. And yet its business is back to booming. What’s not booming: marketing spending. Meta’s marketing and sales spending is down 15% year over year. The story at Google is not too dissimilar and across tech companies. The more-with-less era has arrived for tech marketing budgets that not just wind up in consumer media but also B2B. When push comes to shove, these companies will spend on data centers over marketing, unless they’re locking up distribution to avoid competition.
I’ve talked to several publishers in different parts of B2B that have felt the impact. In research and insights, companies are seeing pullbacks in commitments with a preference for shorter deals. Sales cycles always lengthen during times of turbulence. One B2B publisher saw clients for their research products wanting to craft deals as services/media to add flexibility that will get the OK from the CFO.
The CFO has taken the scalpel to all manner of spending. One boss of a data firm said the problem is less client churn and more clients who had paid for 10 seat licenses getting by with half that number. T&E has been cut at many tech businesses, which is a challenge for events. What’s more, these cuts aren’t cyclical but long-term structural adjustments to business operations to better suit a “higher-for-longer” rate environment. Elon Musk is pilloried regularly, but many of his peers and engineering experts view him with admiration for even keeping Twitter/X running after cutting costs so much.
Media is always downstream of tech. And much of B2B’s buoyancy in recent years has been derived from Silicon Valley’s discovery of the magic of software-as-a-service business models. You build it once and sell access in perpetuity.) CJ Gustafson, my unofficial muse in all CFO matters, broke down the miracle of SaaS models on a recent episode of The Rebooting Show.) Anyone operating a business of any size will quickly pile up these recurring costs. I’m still amazed at how much I pay to sign a PDF. I’m not buying that I’m getting a “cloud document management service.”
These costs are now more scrutinized, and the same paring people see in research and data services ends up happening with software. “Sleeper” subscriptions are not just an issue for consumer subscriptions. Before the miracle of SaaS, I used to cover web analytics software companies. Their biggest issue was they became “shelfware” because they were bought but often not used or not used that much. The market correction has slammed SaaS businesses.
The lesson here, other than another reminder that media is always hard, is the same: and make sure you can prove your value and diversify. B2B relies heavily on events. The sales marketplaces are more protected than the sprawling “festivals.” The biggest risk for Web Summit from the “boycott” initiated by many tech companies over the divisive remarks made by its now-former CEO is that these companies will see no difference after pulling out. That shifts a change from cyclical to structural.
The pandemic boom convinced too many companies they had better businesses than they really did. B2B, including B2B media, was no different. I talked to so many publishers that were suddenly up and to the right with unnatural growth rates. That led to the typical cycle of overexpansion. I see in my own little area bigger trade companies pulling back and making cuts. Many will be down this year. The pandemic growth rates seen in other areas were also erased here. These businesses have returned to where they were in many cases pre-pandemic. The cash-grab events that add little tangible value.
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